Vallourec's liquidity situation is sound.

Vallourec's liquidity situation is sound.

As at September 30th 2018, the Group had €769m of cash, and undrawn medium and long term confirmed facilities of €2.2bn. On the same date net debt was €2,097m including short term debt of €1,072m, of which €264m was commercial paper.

The adjusted debt ratio, as defined in the banking contracts ("the banking covenant"), was estimated at 71% on September 30th 2018, well below the limit of 100%.

This indebtedness ratio is defined in the banking agreements as the ratio of the Group's consolidated net debt* to the Group's equity, restated for gains and losses on derivatives and valuation differences (gains and losses on the consolidated subsidiaries in foreign currencies). This indebtedness ratio is tested once a year on the 31st December, and must be below a limit of 100% on this date.

For 2019:

Vallourec targets a continued growth in its oil and gas activity and expects further significant cost savings and the continuous deployment of its new competitive manufacturing routes. Each of these objectives should contribute to an increase in EBITDA.

The Group reminds that the working capital outflow in the first nine months of 2018 reflects to a large extent the non-recurring impact of an increase resulting from the particularly low level reached at the end of December 2017, measured in number of days of sales. Also, the level of capital expenditure will remain limited.

Based on current macroeconomic and market trends** and the objectives outlined above, the Group would respect its banking covenant at the end of 2019.

(*) Including the shareholder loan in Brazil
(**) Cf paragraph Information and Forward-Looking Statements